Expert Determination

Expert Determination


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1. What is it?

Expert determination is a private and confidential method of dispute resolution whereby disputing parties appoint an expert to determine a matter of fact, valuation or law, in a final and binding manner.  Where an expert’s decision is not binding but advisory, then this process is known as “Expert Evaluation”.

2. How does the process work?

Generally there are five simple steps to the process: -

(i) Appointment
The parties will either jointly agree on an expert or they will refer the appointment of the expert to an appointing body. The agreement to refer a particular dispute to an expert ordinarily occurs after the dispute has arisen, in circumstances where the parties’ advisors deem such reference to an expert to be most appropriate in light of the nature of the dispute.
However it is not unusual to insert a clause in a commercial contract, which provides that in the event of a dispute the parties agree to refer the dispute  to an expert be appointed by a specified appointing body.

(ii) Preliminary meeting
The expert will arrange for a preliminary meeting with the parties for the purposes of introductions, isolating the issues in dispute and seeking agreement from the parties on the process.

(iii) Written submissions
Usually the expert will require the parties to deliver written submissions on the issues in dispute instead of holding an oral hearing. However the parties may decide that an oral hearing is necessary.

(iv) Investigation
Inherent in the expert's power is the power to investigate, i.e. to act inquisitorially by virtue of the specific expert capacity.  The expert may also conduct his own investigations without any reference to the parties, mindful of the overriding duty to act fairly as between the parties.

(v) Determination
The expert will produce a written determination after the parties have submitted their written submissions and/or made oral submissions and after the expert has carried out any investigation.  The expert may be entitled to make an award of costs in the determination.

3. Appropriateness of Expert Determination to a dispute?

Expert determination is ideally suited to disputes in matters of valuation which are primarily dependent on specific  issues, for example, insurance wording disputes, sale of goods disputes, fitness for purpose and boundary disputes.
Expert determination can also be used where there is no dispute but a difference which needs to be resolved, for example the valuation of a private business.

Disputes that are appropriate to refer to expert determination are usually commercial, net issues which are technical in nature, for example;-

  • Share valuation in private companies
  • Valuation of businesses
  • Valuation of property
  • Measurement and rates in construction projects
  • Rent Reviews
  • Price adjustment and take-overs
  • Transfer and valuation of pension rights
  • Long term commodities supply contracts
  • IT contracts

4. Industry Suitability to Expert Determination

Experts are regularly engaged in business and industry areas such as broadcasting, telecoms, IT, PPP, energy and natural resources, banking and finance.

5. Time and Cost

Expert determination is generally quicker than arbitration or litigation.  An Expert Determination agreement may specify the time periods by which the process should last.  As a general guide the process should take no more than several months to conclude.
The parties will generally be jointly responsible for the expert’s fee.  The expert’s fee will depend on the speciaility, complexity and value of the dispute.  An expert has no inherent power to award costs, unless the parties specifically give the expert that power.

6. Final & Binding

The expert's determination is final and binding on the parties. There may be a provision for the parties to have a time period following the determination by which they must formally reject in writing the determination. If there is no rejection within the time frame then the determination is final and binding on the parties. If there is a rejection then the parties may wish to refer the matter to arbitration or litigation.

7. What is the difference between Expert Determination and Arbitration?

Expert determination is not the same as arbitration.  In the appointment of an expert, the parties opt for their dispute to be determined by an independent third party acting as an expert rather than any arbitral capacity.
In any expert determination clause it is usual for the parties to expressly state that the Arbitration Acts (1954, 1980 and 1998) do not apply to the Expert Determination.  The reasons are largely associated with the rights of the arbitrator and the parties which are granted under the Arbitration Acts.

In addition the clause will also expressly state that the neutral third party nominated to determine the dispute is acting "as an expert" to further reinforce the fact that the parties do not wish the Arbitration Acts to apply to this form of dispute resolution.
Parties may also specify in an expert determination clause, the time limits by which the expert must have made his determination from the date of appointment.

Unlike arbitration:

  • There is no right of challenge to have the expert's determination set aside or remitted before the High Court.  Expert Determination is final in every sense.
  • There is no right of the expert to state a case on a point of law to the High Court.
  • There is less emphasis on due process and natural justice.
  • There is usually no oral hearing or pleadings. Instead the expert will seek written submissions from the parties.
  • The process is informal, quick and cost efficient.  .
  • The expert cannot rule on his own jurisdiction.
  • There are no back up rules of procedure or support from the High Court in relation to process in expert determination, e.g.: The extent to which courts are open to give preliminary rulings on points of law is uncertain.
  • The enforcement of an expert’s decision trans-nationally is not recognised as it is for arbitration decisions.  There are no international conventions for the recognition of enforcement of experts’ decisions abroad and so it may not be appropriate for international contracts.
  • The expert has no authority to summons a witness.